Coalition sidelined, fossil outrage as Labor strikes deal on Energy Relief bill with Greens

by Daniel Bleakley | Dec 15, 2022 | Energy & Environment, Latest Posts

The government’s Energy Price Relief bill has passed in a tumultuous final day of parliament for 2022 after the Greens secured funding to help people on low incomes transition away from gas appliances and electrify their homes. But Labor torpedoed an amendment to stop fossil fuel subsidies and the question of the cartel behaviour by gas companies remains, reports Daniel Bleakley.

In their speeches to parliament yesterday, the cross-bench supported the government’s Energy Price Relief Plan but said it didn’t go far enough and strongly emphasised the urgent need for a windfall profits tax.

Cross-bench independent Andrew Wilkie said that while he applauded the government for standing up to selfish coal and gas companies, there was one glaring omission in the package and that is a windfall profits tax. Wilkie reminded the Parliament that Australians are the ones who own these resources rather than companies like Shell, BHP and Woodside. 

Member for Goldstein Zoe Daniel was also scathing of the gas industry telling her parliamentary peers that multinational fossil fuel companies operating in Australia are set to make a gross profit of up to $140 billion this year from gas and coal.

“The game is up.” The Member for Goldstein said. “These companies should be careful crying wolf as they continue to make windfall profits from their export product and pay next to no corporate tax.”

The Greens also went hard with Adam Bandt saying “Today is the beginning of the end for gas.” Bandt said that the Greens would continue to pressure the government to implement a two year freeze on power bills and that the passing of the bill proved that such interventions were possible.

But while this was resolved in the corridors of Parliament, we’ve also heard Australia’s gas industry representatives making baseless claims that the plan risks energy rationing and power shortages. Shell and Woodside have now overplayed their hand by threatening to restrict domestic supply exposing themselves as members of a cartel.

Zoe Daniel deploys “C word” in Parliament

Zoe Daniel also called out the industry’s cartel behaviour in her speech telling parliament that Australian gas companies “operate in an anti-competitive way as an effective cartel in the way they control production and fix prices.”

While some industry observers have identified the Australian gas industry as a cartel for many years, they are now joined by a growing chorus of voices demanding action.

Last week gas finance analyst Bruce Robertson released a report from the Institute for Energy Economics and Financial Analysis (IEEFA) which showed that all gas fields in eastern Australia would remain profitable at $7 a gigajoule. The government’s $12 cap gives gas companies an additional 70% of pure profit above the already profitable $7 price.

The indisputable fact is that east coast gas producers are very very profitable at $12 a gigajoule. In this context, Shell and Woodside threatening to restrict domestic supply because of the price cap is clearly cartel behaviour and a case of extortion against a democratically elected government. Cartel behaviour is illegal in Australia.

ACCC shy

The Australian Competition and Consumer Commission (ACCC) states:

It’s illegal for businesses to agree to act together in a cartel instead of competing.

We know there’s an abundance of gas supply in the east coast market and that the cost of producing gas for companies like Shell and Woodside is less than half the $12 price cap. So if the market was operating as markets were intended to operate, these companies would be competing on price and trying to take market share away from each other.

They clearly have plenty of margin available above their cost of production to engage in competition but are instead threatening to restrict supply in an attempt to influence government decisions.

Such behaviour is not in line with a functioning market and is clearly the action of a cartel.

Bruce Robertson has been following the gas industry closely for many years and points out that there have been many examples of cartel behaviour by the Australian gas industry in the past.

The strongest example of this is when the domestic spot price is above the international spot price. This has occurred multiple times over the past decade. In June 2016 the domestic spot price in Australia was 60% higher than the spot price in Japan. That means that Australian gas was selling in Japan cheaper than it could be purchased here in Australia.

It’s a gas! Australian gas is a bargain … if you’re Japanese

Bruce Robertson says that in gas exporting countries, the domestic price should never be higher than the international price and that the only explanation for this happening is a cartel. If the market is operating correctly, the domestic price should always be cheaper because it doesn’t include the shipping costs associated with exports.

And we must remember that this isn’t just any cartel. This cartel affects the price that millions of families pay for their electricity, not to mention thousands of companies who depend on fair gas prices to stay in business.

But so far, the ACCC has done nothing.

Labor torpedoes cross-bench move to stop new fossil fuel subsidies

The government also has questions to answer. The way that the ACCC came up with the $12 per gigajoule figure hasn’t been released publicly so the only price cap figure with transparent workings to date is the $7 figure published by IEEFA.

“In the interest of transparency” yesterday Member for Kooyong Monique Ryan moved an amendment to the bill calling on the government to produce the ACCC report which the government has cited as the basis for establishing the $12 price cap.

The amendment was voted down by the government however Treasurer Jim Chalmers assured the cross-bench that the government would provide the requested information from the ACCC to the public.

The government has ended the year on a high note however the clear message from the Greens and cross-benchers is that there are strong calls for them to go far further. Australians want a windfall profits tax, they want an end to Australia’s gas cartel and they want to improve transparency around how their government makes decisions.

Albo’s Energy Relief bill a big relief for the fossil fuel giants

Daniel is a qualified mechanical engineer, climate activist and former Anne Kantor Research Fellow at The Australia Institute working in the Climate and Energy program. His areas of interest include climate policy, electrification, renewable energy and fossil fuel taxation.

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